Minimum Wage Legislation, And The Small Business 'Survey' Scam

A group calling itself the Small Business Majority (SBM) recently released a survey to support its argument that two-thirds of small businesses support a hike in the minimum wage. It’s a counterintuitive result: After all, if small businesses don’t mind a minimum wage hike, then pursuing the policy should be a no-brainer for Congress.

A history of minimum wage increases under the 1938 act, current to September 2009. (Photo credit: Wikipedia)

But a closer look at SBM reveals that it’s just another misleadingly-named activist group more interested in playing politics that supporting good policy.

Were SBM actually interested in the impact of a higher minimum wage on small businesses, the majority of employers they surveyed would have employees earning the minimum wage. Instead, a full 85 percent of the businesses polled by SBM had no employees earning the minimum. These business owners might support a higher minimum wage for ideological reasons, but they don’t speak for members of the business community who actually have skin in the game or whose employees are at risk.

From this perspective, the SBM poll tells a completely different story than what the group put in its press release: If just 15 percent of surveyed small businesses have minimum wage employees, and one-third of small businesses opposed a wage hike, that means it’s not just minimum wage-paying businesses that oppose wage hikes.

SBM has used this communications tactic before: In a series of earlier state surveys on healthcare legislation, the group found broad small business support for a health insurance mandate. Even the New York Times’ small business blog smelled something fishy: In their words, SBM has “all the hallmarks of a shadowy interest group” with “a name that conceals more than it reveals.”

Moreover, the Times’ writer points out that SBM doesn’t actually have small business members—a revealing fact for a group that ostensibly advocates on behalf of small businesses.

Groups like SBM have proliferated in recent years, as activists have sought the cover of ideologically-friendly businesses to support their policies. “Business for a Fair Minimum Wage” is another example, a loose collection of consultants, lawyers, self-employed artists, and hundreds of others who can support a higher minimum wage because they don’t have to pay it.

Costco is one example. The company’s CEO made waves when he endorsed a higher minimum wage in March of this year. Yet the membership warehouse giant has a unique retail business model (you pay to be a customer) that allows them to pay above the minimum wage and earn nearly $10,000 in profit per employee.

Compare that to the $2,600 in annual profit-per-employee earned by a typical national restaurant chain, which would be wiped out by the added cost of the minimum wage increase proposed by Senator Tom Harkin (D-IA) and Rep. George Miller (D-CA). In order to remain profitable, businesses must either dramatically raise prices—an unlikely occurrence when faced with customers who can opt not to dine out—or find ways to maintain their business operation with manageable costs. That means more customer self-service, which in turn means job losses and fewer job opportunities in the future.

You wouldn’t know any of this by listening to the Small Business Majority, Business for a Fair Minimum Wage, or any of the politicians who’ve attached their names to minimum wage proposals.

Michael Saltsman is the research director at the Employment Policies Institute.